Mumbai ITAT rules that transfer of an undertaking under slump exchange is not liable to capital gains tax

The Mumbai Tribunal holds that Transfer of undertaking against issue of bonds / shares is not a “slump sale” and not taxable as capital gains.

Recently, the Mumbai bench of the Income-tax Appellate Tribunal (the Tribunal), in the case of Bharat Bijlee Limited Vs. ACIT (ITA NO. 6410/MUM/2008) (Judgment Date: 11 March 2011, Assessment Year: 2005-06)  , held that where a business undertaking is transferred against issue of bonds / shares, the transaction is not a “Slump Sale” as defined under Section 2(42C) of the Income-tax Act, 1961 (the Act) and therefore provisions of section 50B of the Act relating to computation of capital gains in case of Slump Sale are not applicable to such transfer.

Further it is held that as the cost of acquisition / improvement of business can not be ascertained, computation mechanism fails and such transfer is not liable to tax

Facts of the case

• During the year the taxpayer transferred its Lift Field Operations Undertaking (the Undertaking) to M/s. Tiger Elevators Pvt. Ltd.

Please become a Premium member. If you are already a Premium member, login here to access the full content.